$40000 a Year Is How Much an Hour After Tax (How to Budget)

Imagine going to a job interview, and the interviewer mentions a whopping $40,000 yearly salary. It sounds big, right? But, the question should be: “$40000 a year is how much an hour?” “Can I survive on $40,000 a year?” $40,000 a year is $19.23 an hour. 

Hearing a huge figure like that might make you want to jump on the offer, but you need to have a detailed analysis of how you can survive on that yearly income, especially if you cater to a family. There are many other factors to consider aside from family size, including where you live and how much you pay for taxes.

If you want to know how much an hour is $40,000 in a year, and learn how to budget and manage this income, then you have to keep reading.

 A summary of income taxes in America

The amount you have to pay on tax varies depending on your taxable income, tax bracket, country, and location. In America, for instance, the percentage tax can be as high as 37% or as low as 10%, depending on what tax bracket your taxable income falls into. This percentage also varies based on state.

Without knowing how much percentage tax your state places on your income, you might not be able to determine if that income will be enough for you.

Federal Income Taxes

This tax is the percentage of your taxable income required by the Federal Government. In America, the progressive tax system is used, which means that the more you earn, the more taxes you pay.

There are seven tax brackets, and they include:

10% of taxable income from $0 – $10,275

12% of taxable income from $10,276 – $41,775

22% of taxable income from $41,776 – $89,075

24% of taxable income from $89,076 – $170,050

32% of taxable income from $170,051 – $215,950

35% of taxable income from $215,951 – $539,900

37% of taxable income from $539,901 and above

Read more about the federal tax system here.

State Income Taxes and Variations

Yes, you can have taxes imposed by your state government and even local government because the U.S has a multitiered income tax system. There are specific differences in the tax rates. Where the federal impose a progressive tax rate, states can have both a progressive and a flat tax rate, while some states do not impose a tax on income at all but would tax you based on your dividends and interests.

States that use a flat tax rate include Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah.

States With No Income Tax.

In the United States of America, there are a total of nine states that do not require workers to pay taxes. These are:

  1. Wyoming
  2. Alaska
  3. Florida
  4. Nevada
  5. South Dakota
  6. Tennessee
  7. Texas
  8. Washington
  9. New Hampshire

If you live in any of these states, you do not need to worry about removing income tax from your gross income; you get to take your complete income home.


Is $40000 a Good Yearly Income?

$40,000 can be a good annual salary, but it can also be barely enough depending on several factors.

It will be difficult to say if $40,000 is a good yearly salary because living conditions vary. It is a good salary if you work in a low-tax state and live alone, but it will not be enough if you have a significant number of dependents and unpaid debts and live in a high-priced environment.

However, if you understand the importance of budgeting, you can live with $40,000 yearly.

$40000 a Year Is How Much an Hour After Tax?

If you have a yearly income of $40,000 and your tax rate at the end of the day is 12% (using the federal tax bracket), here is how to calculate the amount you need to deduct.

12/100 * 40,000 = $4,800

That means you must remove $4,800 from your yearly income as federal tax. Depending on your state, you might still need to deduct state and local taxes, but let’s assume you live in one of the nine states without an income tax.

$40,000 – $4,800 = $35,200

From your $40,000 yearly income, you get to take home $35,200 yearly after-tax.

How Much per Hour?

How much is $35,200 per hour? To determine this, we need to establish the number of working hours for the entire year and do a breakdown.

There are officially 5 working days a week, and the average standard number of hours per day is 8 hours. 

8 hours multiplied by 5 working days = 40 hours in a week.

There are 52 weeks in a year; 

40 hours multiplied by 52 = 2,080 hours in a year!

Your $35,200 divided by 2,080 hours = $16.92 per hour

Without the tax, your $40,000 will be $19.23 per hour

How Much per Day?

$40,000 A Year Is How Much An Hour?

There are 8 working hours in a day.

If you pay a 12% tax rate:

$16.92 * 8 hours = $135.36 per day

If you do not pay tax:

$19.23 * 8 hours = $153.84 per day

How Much per Week?

5 working days a week. Using the above calculations,

Taxed income:

$135.36 daily * 5 = $676.8 per week

Full income:

$153.84 daily * 5 = $769.2 per week

  • How much bi-weekly?

Bi-weekly means every two weeks: if you get paid bi-weekly, you get paid twice a month. Lucky you! 

Taxed Income:

$676.8 weekly pay * 2 = $1,353.6 bi-weekly

Full income:

$769.2 weekly pay * 2 = $1,538.4 bi-weekly

  • How much monthly?

You have to multiply the weekly pay by 4 or the bi-weekly pay by 2, and you will have the same results.

Using your Weekly pay

Taxed income:

$676.8 * 4 = $2,707.2 monthly

Full income:

$769.2 * 4 = $3,076.8 monthly

Using your Bi-weekly pay

Taxed income:

$1,353.6 * 2 = $2,707.2 monthly

Full income:

$1,538.4 * 2 = $3,076.8 monthly

How to Budget a $40,000 Yearly Salary Monthly

There are three ways to budget for a $40,000 annual salary, and these are:

How to budget a $40,000 yearly salary monthly
Photo by Kelly Sikkema on Unsplash
  1. 50/30/20 method

This method is where you split your income into three categories which are:

  • Needs

Your needs take 50% of your take-home income. These are things you cannot do without when it comes to living. E.g., food, housing, transportation. 

  • Wants

30% goes to your wants. They are things you can splurge on, like eating out, clothes, and other things to indulge your interests and hobbies. 

  • Savings

20% goes to your savings, either long-term or short-term.

  1. 80/20 Method

This budgeting method is for people with many unpaid debts or who need to spend more on their needs, either based on the high cost of living or family needs. The con of this budgeting method is that you cannot save.

80% of your income goes to needs while 20% goes to wants.

  1. Envelope budgeting method

This budgeting method is when you put cash into an envelope for each spending category. It is a suitable budgeting method, especially if you get paid daily, weekly, or bi-weekly. It is also an excellent method if you receive a cash payment. If not, you need to withdraw your earnings and split them into labeled envelopes.

Also Read: Budgeting Tips For Beginners: 7 practical steps to create a personal budget

Jobs That Will Earn You $40,000 a Year

According to the U.S Bureau of Labor Statistics, these are the jobs that fall within the $40,000 yearly income:

  • Electrical operators
  • Agricultural equipment operators
  • Aircraft service attendants
  • Animal control workers
  • Animal trainers
  • Glass installers & repairers
  • Personal trainers
  • Bill and posting clerks
  • Broadcast announcers
  • DeeJays
  • Carpenters
  • Painters
  • Construction workers
  • Concierges
  • Cooks

There are also online side hustle jobs that can earn you up to $40,000 yearly. 

  1. BONUS: Tips to manage and live on any salary
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Photo by Ibrahim Boran on Unsplash

Conclusion – 40000 a year is how much an hour

A $40,000 yearly salary is enough to live on, but you must be smart about managing your money. For example, someone living in New York might find it challenging to live with this amount, while someone in a low-taxed state like Wyoming might live fine, save, and even splurge a little with the same amount.

Learning that $40,000 a year is a little over $19 depending on tax might help you decide if that job is actually worth it or not.

CTA: Do you think $40,000 is enough to live on? How do you think one should manage this kind of salary?

READ ALSO: 18 Dollars An Hour Is How Much A Year? Can You Live On It?

Michael launched Wealth of Geeks to make personal finance fun. He has worked in personal finance for over 20 years, helping families reduce taxes, increase their income, and save for retirement. Michael is passionate about personal finance, side hustles, and all things geeky.